Prompt Corrective Action (PCA)

Blog by NC TeamUpdated on 19 Mar 2019

Prompt Corrective Action (PCA) is a tool used by the RBI to assess, monitor, control and take corrective actions against banks which show weak financial health. PCA gets triggered when the banks breach the four key regulatory trigger points. The 4 trigger points are Capital to risk weighted assets ratio (CRAR), net non-performing assets (NPA) and Return on Assets (RoA). The PCA framework is applicable only to commercial banks and not extended to co-operative banks, NBFCs and FMIs. The mandatory restrictions by the RBI are on dividend, branch expansion, directors’ compensation while discretionary restrictions include curbs on lending and deposits.